Sensible Marketing for Small Business

With the economic climate a Category 4 hurricane and VC investment at the lowest levels in 12 years, I think its time for a refresher course on pitching to VCs and Private Equity.

When preparing to pitch to VCs, you should also prepare to handle Q&A. The best way to prepare for this “test” is to know the questions before they get asked. This is pretty easy to do. Simply practice your pitch in front of your executive team and some outsiders and have them ask clarifying and challenging questions about your business. Don’t try to answer all these questions, just write them down.   Voila! You now know 90% of the questions you will be asked.   Now your homework is to prepare and practice your answers.

Some entrepreneurs are great at presenting and terrible at Q&A. Some are the opposite. It is important to shine during both portions of a pitch. A quality presentation shows that you understand your business and can explain it well.  A quality Q&A session shows how you process and respond to challenges and gives a glimpse of your personality.

These tips are primarily for entrepreneurs that are presenting their business plans to investors, but many of these concepts apply for other Q&A scenarios – sales presentations, partner presentations, etc

1. Answer the Question. Seems obvious, but too many entrepreneurs ramble and try to use Q&A as a way to extend their presentation and squeeze in more information
2. Be Concise. Try to answer the question in 1-2 sentences. Give them a short, concise answer that stands on its own. If they want more information, they will ask for it. Make sure you immediately give them an answer and then you can give them supporting information if needed. Don’t start with a bunch of background information that leads up to the answer.
3. Don’t ramble. If someone asks a question and has a puzzled look on their face, don’t just ramble until they cry “mercy”. Ask them “Did that answer your question?”.
4. Practice. Sit down with your team and write up 30 questions that might be asked. You know your business and the holes and risks, so you know what questions you will get. Then prepare tight answers for these questions and practice delivering them. If you do this, you will be prepared for 90% of the questions you will receive.
5. Don’t be defensive. Too many entrepreneurs make Q&A into an argument because they feel they have to defend their business. Be confident, but flexible. They are going to ask some challenging questions that poke holes in your business. Address them without being stubborn.
6. Know your audience. Do your homework on who will be in the audience. Know their career, their education, the deals they have done. This will help you understand why they asked certain questions as well as how to answer them. It will also help you build a relationship with them. And you will impress them at how prepared you are when you toss out something like… “I know you recently did a deal with XYZ so you understand that…”
7. Stroke their ego. You might have some people in the audience that want to ask a tough question just to prove how smart they are. Give them the stroking they need by acknowledging their expertise. “You have a lot of experience in this field, so you already know…”
8. Don’t start a statement with “honestly”. This makes it seem that you have been lying to them the entire time, but this next statement is going to finally be truthful.
9. Don’t say “good question”. If you tell one person “good question” and you don’t say it to the next person that asked a question, you offend them because you didn’t think their question was good enough to be labeled as a “good question”
10. Take notes. You probably have some smart people in the room and you can learn something from each question they ask. At least pretend that you are listening and want their feedback… take notes. This shows that you are coachable, and open-minded and that you value their opinion.
11. Don’t be a know-it-all. It is OK if you don’t have the answer to every question. In fact, it is quite refreshing to hear an entrepreneur say “I’m not sure about XYZ, but I’ll look into it and get back with you.” It shows they are human and willing to learn.

Tech entrepreneurs tend to be in love with their product or service.  They are frequently technical in nature while the investors they are pitching to are not.  Instead, angels and VCs tend be financially oriented or have backgrounds in consulting or general management.

Entrepreneurs start with the assumption that everyone will love their idea or product.  Investors start with the assumption “Why should I care?  What’s wrong with this opportunity?”

Take the time to put yourself in the investor’s shoes.  Investors hear dozens of pitches a week.  Telling a story makes it easier for them to “get it.”  Prior to going to market with your pitch, test drive it with savvy entrepreneurs, your executive team and friendly investors — investors that are not targets for you.  This will help you develop and practice your pitch so that you can deliver it successfully when you’re in front of that key investor.

Finally, for additional pointers on delivering that pitch, be sure to check out  Giving VC’s a Winning Pitch from Business Week or feel free to shoot me an email or call with any questions.